Oil industry trade groups pan proposed Republican energy bill

Oil industry trade groups pan proposed Republican energy bill

Washington (Platts)--27Apr2006

The National Petrochemical and Refiners Association and the Independent
Producers Association of America Thursday panned a Senate Republican plan
introduced earlier in the day to tackle rising energy prices, urging
policymakers to rethink their proposal dealing with "punitive tax measures"
and price controls to ensure that measures do not unexpectedly exacerbate
problems.

"The nation's 10-year experiment with government intervention into fuel
markets during the seventies led to gasoline shortages and long lines at gas
stations," NPRA President Bob Slaughter said in a statement. "That history
does not suggest that price controls should be an acceptable template for
congressional or administration action this year. Further, elimination of
certain tax provisions will have the affect of restricting, not enhancing
domestic gasoline supplies."

IPAA, in a statement, said US natural gas producers were "under attack"
from lawmakers. "These policies will not lower gasoline prices. Instead,
they will only do harm by forcing the American oil and natural gas production
industry to scale back their domestic investment in exploration, while
increasing our reliance on imported oil."

Senate Republicans unveiled an eight-point plan Thursday designed to deal
with soaring energy prices. Its proposal included a federal tax holiday, a
$100 rebate to American tax payers, the opening of Alaska's Arctic National
Wildlife Refuge to oil and gas development, probation on price gouging, and
removal of certain tax incentives to oil companies, including their ability to
use Last In, First Out tax accounting.

Slaughter's harshest criticism was directed on the LIFO changes, which
some in the industry have called a de facto windfall profits tax on the oil
industry. "Adoption of the proposed LIFO changes would demonstrate to
potential investors that the US government might well change the rules
affecting investments after these same investments have been made," he said.
"This is something that the US government constantly warns other governments
not to do, since it increases investment uncertainty."

IPAA said repealing existing tax incentives or "instituting harmful new
tax policies for domestic oil and natural gas producers," would place "a
stranglehold on homegrown opportunities for energy security."

Slaughter said the Senate Republicans proposal for a temporary holiday
from the 18 cent/gal federal gasoline tax is "worthy of consideration," but
"it is not clear that a tax holiday actually creates conditions that bring
stability to gasoline price or supply."

He said the anti-price gouging provision in the proposal was "problematic
because the term itself is imprecise and extremely subjective." Slaughter
noted it would be "difficult, if not impossible, to define or reduce to
statutory language."

"That inherent ambiguity will quite often lead to interpretations that
Congress intended to impose price controls. The result will be that consumers
will have to relive the supply shortages, long lines and other added costs and
inconveniences of the 1970s. NPRA hopes that Congress will continue to
reflect on these facts and reject policies based on market intervention,"
Slaughter said.

--Cathy Landry, cathy_landry@platts.com

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